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Moving Average Method

[MOO-ving AV-er-ij METH-uhd]

What is the definition of Moving Average Method?
A method used in accounting to calculate the average cost of inventory on a perpetual basis, which adjusts after each inventory purchase by averaging the costs of the current inventory and any new purchases.
Using Moving Average Method in an Example

A company purchases 100 units of a product at $10 each and later buys another 100 units of the same product at $15 each. Using the moving average method, the average cost per unit after the second purchase is calculated as (($10 * 100) + ($15 * 100)) / (100 + 100) = $12.50 per unit. This new average cost will be used to value the inventory and calculate the cost of goods sold when the next sale occurs.

Using Moving Average Method in a sentence

Our inventory costs are calculated using the moving average method, which helps smooth out price fluctuations over time.

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Management Discussion and Analysis (MD&A)

A section required by the SEC in financial reporting where management provides an explanation of significant changes in operations, assets, and liquidity, highlighting the company's performance and future outlook.
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A report included in a company's annual report, where management provides its assessment of the effectiveness of the company's internal control over financial reporting, alongside the audited financial statements for the most recent fiscal year.
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Manufacture

To make or process a product, typically on a large scale using machinery.
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The increase or decrease in the total costs of a business as a result of producing one additional or one fewer unit of output.
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Mark-to-Market

A method of valuing assets that involves adjusting the carrying amount of an asset to reflect its current market value.
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The total value of a corporation as determined by the market price of its issued and outstanding common stock.
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The percentage of total sales or revenue generated by a company or product within a specific industry or market, compared to the total sales or revenue of that industry or market.
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Marketable Securities

Financial instruments, such as stocks or bonds, that can be easily bought or sold on public exchanges or over-the-counter markets due to their high liquidity and active trading.
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Markup

The amount added to the cost price of goods to cover overhead and profit, resulting in the final selling price.
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Matching Principle

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Materiality

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Materials Inventory Account

An inventory account that records the value of raw materials, parts, and supplies held by a company at any given time, which are used in the production process or for maintenance and repairs.
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Maturity

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Merchandise

Items that can be bought or sold, including all movable goods such as cars, textiles, and appliances.
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Merchandise Inventory

The goods that are currently on hand and available for sale to customers in the regular course of business operations.
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A business combination in which one entity directly acquires the assets and liabilities of one or more entities, resulting in a unified company. This process may involve the absorption of all assets and liabilities by the buyer without the creation of a new entity.
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Microeconomic Pricing Model

An accounting model based on the principle that maximum profit is achieved when the difference between total revenue and total cost is maximized, aligning with basic microeconomic theories of profit maximization.
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The branch of economics that studies the behavior and decision-making processes of individual economic units, including households, companies, and industries, focusing on the mechanisms of supply and demand and the allocation of resources.
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Mixed Costs

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